New requirements for digital currency exchange providers

With bitcoin and Initial Coin Offerings (ICOs) dominating the news (see our previous article on ICOs) and backyard BBQ conversation, AUSTRAC is also set to get more involved with Parliament recently passing the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (Amendment Act).

The Amendment Act will impose significant obligations on digital currency exchange providers (Providers) including an obligation to register with AUSTRAC as well as maintaining a compliant Anti-Money Laundering and Counter-Terrorism Financing Program (AML Program). An AML/CTF program establishes the operational framework for reporting entities (such as Providers) to meet their compliance obligations under the AML/CTF Act. An AML/CTF program must specify how the reporting entity identifies, mitigates and manages the risk of its products or services being misused to facilitate money laundering or terrorism financing.

In addition, Providers will now be mandated to perform identification and due-diligence on their customer. This involves collecting prescribed identification information from every customer and verifying the provided information against reliable and independent documentation or data. Further, Providers are obligated to report to AUSTRAC (within prescribed timeframes) suspicious matters and threshold transactions when relevant.

These obligations impose significant compliance and risk mitigation obligations on Providers and Providers need to promptly familiarise themselves before the Amendment Act comes into force. The Amendment Act confirms a change in attitude within AUSTRAC as digital currencies are now being taken very seriously and the development of the industry is being keenly watched by investors, commentators and regulators alike.

The Amendment Act is set come into effect in early April.

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John Bassilios

John Bassilios

Partner & Fintech and Blockchain Lead

John has broad experience in financial services, funds management, blockchain, crypto, web3 and corporate law.

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